AIA: White House needs to boost aerospace infrastructure

Last year’s slump in commercial aircraft sales and employment was not as sharp as predicted and not nearly as deep as the industry experienced 10 years ago. That’s the assessment of the Aerospace Industries Association (AIA), which also sees a recovery for civil aviation between next year and 2006, along with a concurrent upswing for aerospace employment.

But the next White House–whether it is a re-elected Bush Administration or one run by someone else–must play a stronger role in determining the future health of the U.S. industrial base and the nation’s aviation and space infrastructure, according to AIA president and CEO John Douglass.

AIA is giving the candidates a set of initiatives it says will secure the economic and national security advantages that the U.S. has enjoyed in the past through its leadership in aerospace. The campaign issues reflect the recommendations of a report issued last year by the Commission on the Future of the U.S. Aerospace Industry, of which Douglass, General Aviation Manufacturers Association president Ed Bolen and moonwalker Buzz Aldrin were members.

Candidates for the presidency will be asked to support plans to modernize ATC, increase NASA’s R&D budget, reverse the decline of the aerospace workforce, find a replacement vehicle for the space shuttle and reform the export licensing process. AIA is also calling on the federal government to integrate aerospace policy across all of its branches by creating aerospace policy offices in the White House, Congress, the Office of Management and Budget and all federal agencies.

Will 2004 Be a Turnaround Year?This year is seen largely as a turnaround year, with industry-wide aerospace sales growing by less than 1 percent–up $1 billion to $148 billion. Sales of military equipment to the Defense Department, which partially offset the recent dip in commercial sales, are expected to increase $1.9 billion to a total of $61 billion. Sales to non-defense government agencies are predicted to grow by more than half a billion dollars to $17 billion.

Speaking at AIA’s 39th annual year-end review, Douglass said an extended forecast for 2005 to 2006 predicts a return to growth as defense spending rises and airlines begin to post profits and purchase new airplanes.

The U.S. aerospace industry generated $147 billion in sales last year, down $6 billion from $153 billion in 2002, while aerospace profits declined to an estimated $5 billion–the lowest level in eight years. Sales of airliners fell $7.1 billion, following a drop of $6.6 billion in 2002. The reduced production of airliners–280 airplanes last year compared with 379 in 2002–dragged transport revenues down 26 percent to an estimated $21 billion.

Foreign aerospace sales decreased $2.4 billion from 2002’s $57 billion. Military aerospace exports, which peaked in 1998 at $12 billion, held steady last year at $9.4 billion. Conversely, civil aerospace exports declined for a second year in a row–down $2 billion to $45 billion.

Imports declined last year for the second year in a row. Imports of complete civil aircraft fell $500 million to $12 billion, while aircraft engine imports dropped $1 billion to $2.7 billion. AIA said aircraft and engine parts imports remained depressed at $10.7 billion, reflecting decreased domestic production of civil aircraft and cost-saving strategies of domestic airlines. In total, imports of aerospace products decreased $1 million (3.7 percent) to $26 billion.

In 2002, the latest year of comparative data, the U.S. aerospace industry posted the highest trade balance of all industry categories. The surplus generated by aerospace foreign trade last year totaled $28 billion.

With a $2.4 billion decrease in exports and a $1 billion decrease in imports, the industry’s trade surplus contracted $1.4 billion. The aerospace trade balance has declined $13 billion since peaking at $41 billion in 1998 due to $10 billion less in exports and $3 billion more in imports.

Total orders increased $2.3 billion to $142 billion last year, ending a two-year slide. With shipments totaling $145 billion, the unfilled order backlog decreased $2.5 billion to $203 billion. Shipments of complete civil aircraft this year are expected to reach 2,635 aircraft worth approximately $26 billion. AIA estimates that 275 airliners will be shipped this year and will comprise 78 percent ($21 billion) of the total value of civil aircraft shipments.